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Contingency Planning and Crisis Management (Cambridge (CIE) A Level Business): Revision Note

Exam code: 9609

Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

Updated on

Contingency planning

  • Contingency planning involves a business predicting risky or unwanted events, then developing a set of suitable responses

    • Risk assessments of potential disruptions and impacts are carried out

    • Procedures commonly cover risks such as fire or weather-related emergencies

      • Evacuation plans are drawn up and practised

      • Key staff are given emergency responsibilities

      • Alarm systems are tested

      • Preventative measures protect stock and equipment, e.g. installation of fireproof doors

  • Contingency planning can help a business to survive and recover from a period of crisis

    • However, drawing up detailed contingency plans requires time and investment

Evaluating contingency planning

Factor

Benefits

Limitations

Time

  • Helps businesses to respond immediately

    • Clear staff roles & responsibilities 

    • Resources are identified and available 

    • Procedures are shared in advance

  • A time-consuming process

    • Risk assessment takes valuable management time

    • Plans need to be revisited regularly 

    • Staff require training

Cost

  • Can reduce costs 

    • Emergency equipment/resources are purchased in advance

    • Financial losses are likely to be lower

  • Spending on resources needed in a crisis may be wasted if not needed

  • Difficult to budget for unknown crisis situations 

Safety

  • Procedures keep stakeholders such as staff and customers safe

    • Training increases awareness

    • Legal obligations should be met (e.g. fire regulations)

  • Bureaucratic and difficult to implement swiftly

  • Leadership and compliance from staff or other stakeholders is needed

Risk

  • Most likely threats are considered in detail

    • Reduces legal risks if procedures are followed

  • Requires up to date and complete information to be effective

  • Human reactions such as fear and panic cannot be fully mitigated

Crisis management

  • Crisis management refers to the immediate handling of a disruptive and unexpected event

    • It includes communication, coordination, resource mobilisation and decision-making under pressure

      • Short-term significant disruption is likely and long-term business survival is affected

      • Radical solutions such as autocratic leadership and centralised decision-making could ensure business continuity

      • Work activity may need rapid reorganisation

      • E.g. many businesses swiftly implemented remote working for staff during the Covid-19 pandemic

Examples of crisis situations

Business threats include data loss, fire, theft, natural disasters and IT systems failure
Businesses face threats from a range of sources including IT systems failure, natural disasters and theft

  • Crises do not have to be large-scale 

    • The unexpected loss of a CEO, a warehouse fire, or an outbreak of infection within a business can cause a significant crisis that requires a prompt, transparent, and well-communicated response

    • Losing customers' data could be classed as a crisis requiring immediate response from management

Factors affecting crisis management

Speed

Transparency

  • A rapid response can contain or reduce damage 

  • E.g. Procter and Gamble's crisis team responded rapidly when a viral challenge encouraged teenagers to film themselves eating Tide Pods detergent 

    • It quickly published warnings and updated disclaimers on its website

    • This quick response protected P&G from legal action

  • Keeping customers informed and telling the truth can protect reputation

  • E.g. Supply issues in 2018 caused KFC to run out of chicken, leading to the temporary closure of half of its UK outlets

    • It used humour on social media to keep customers informed

    • It apologised and quickly addressed customer concerns, turning the negative story into positive PR 

Control

Communication

  • Ensuring that leaders have the authority and resources to perform at the highest level in a crisis

  • E.g. Walmart's Emergency Operation Center operates 24 hours a day

    • It manages the company's response to events that could affect operations

    • Coordinated by senior Walmart leaders, it can assemble support teams immediately

  • The rapid issue of press releases can reassure stakeholders and reduce recovery time

  • E.g. Scandinavia Airlines (SAS) used social media effectively during the 2010 Icelandic volcanic ash cloud crisis

    • Customers were directed to SAS's Facebook page

    • Staff responded to every message, comment and post

    • Problems were solved immediately; regular updates kept customers satisfied

  • Crisis management and contingency planning cannot eliminate the risk of business disruption

    • Even the best plans can go wrong when a crisis hits

  • The fact that businesses engage in this kind of planning does provide significant benefits, including

    • Business resilience can be improved

    • Negative impacts may be reduced

    • Stakeholders are likely to have greater confidence in the business

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    Author
    Reviewer
    Lisa Eades

    Author: Lisa Eades

    Expertise: Business Content Creator

    Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

    Steve Vorster

    Reviewer: Steve Vorster

    Expertise: Economics & Business Subject Lead

    Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.